International Organizations and National Welfare states

Project Leader

Research Collaborator

Michelle Beyeler

Description and Results

Economic Surveys are a key product of the Organisation for Economic Co-operation and Development (OECD) and its secretariat in Paris. The organisation analyses and assesses a wide range of policy areas that have the potential to improve economic performance. It evaluates national experience in the light of international best practice, and provides specific policy recommendations (1). Economic Surveys offer recommendations based on empirical analyses of a country’s economy. After focusing on purely economic issues for a long time, in the 1990s the Surveys increasingly considered questions of social policy with regard to their economic implications. One of the core tasks of the OECD is to spread ‘best practice’ information through these and related analyses. The OECD is convinced that national policy makers take into account its recommendations: proving the effectiveness of the Surveys and their recommendations. A second claim concerns the consistency of its analyses and recommendations across time and for different countries. Since the OECD identifies ‘best practices’, neither the benchmarks for analysis nor the type of advice given should vary depending on the nation under study or the timeframe – at least in the short term.

If both claims of consistency and efficacy are justified, the OECD is a powerful international organisation. Its recommendations should have far-reaching implications on social and economic policy in fields like employment and unemployment benefits, pensions, health policy, education and the alleviation of poverty. By its own evaluation, the secretariat and its general secretary in Paris adhered to the Keynesian economic paradigm until the mid-1970s. This was replaced by supply side theories in the 1980s. At the end of the 1990s the notion that economic growth must be a social process was added to this paradigm. Too much austerity, rapid budget cutting and a lack of attention to the needs of ordinary citizens can lead to a violent popular ‘backlash’, the new secretary-general argued from1996 onwards. Given its theoretical orientation and its claims of consistency and efficacy, we have to conclude that from the mid-1970s until the end of the 1990s, the OECD exerted a unidirectional effect on national welfare states, supporting the idea of welfare state retrenchment and an increased onus on individuals and families to shoulder greater personal responsibility for their security in times of need. This political stance raised fervent criticism from some quarters of the left, who argued that the OECD represents those international organisations and global forces that destroy national welfare states. In reaction to the demands for the dismantling of job protection legislation and the reduction of unemployment benefits expressed in the Jobs Study, the OECD’s cornerstone analysis of labour market problems, the journal ‘Le Monde Diplomatique’ voiced the fear that thanks to unemployment, the OECD will ‘…finally be able to conquer the irreducible enemy: the Welfare State’.

Is that statement true? Did the OECD really play an important international role in welfare state retrenchment in the 1980s and 1990s by issuing consistent and effective recommendations for all member countries? This was the question our research project set out to answer, resulting in the 14 country studies presented in this volume. There were at least two serious reasons to doubt the double claim of consistency and efficacy. The first reason is the nature of the OECD as an international organisation and its decision-making processes, which rest on consensus and unanimity between member states. A tenet of the neo-realist approach to international organisations states that under such conditions, national interest will prevail. Either the international organisation will not issue any recommendation or demand that goes beyond a ‘lowest common denominator’, or it will recommend to national governments what they want to hear. Hence the recommendations will tend to be either trivial or influenced by the interests of the respective national governments.

The claim to efficacy is also doubtful. Even if recommendations are consistent, it is far from clear that national political actors will adhere to the advice. In contrast to the European Union, the OECD cannot issue binding regulations, directives or decisions for the design of national economic and social policy. And it cannot reduce the room for manoeuvring in social policy by indirect effects caused by, e.g., the criteria of the Maastricht Treaty or the implications of negative integration in the case of the single market. In contrast to the International Labour Organisation (ILO), the OECD has no means to put its goals and advice directly on the agenda of national parliaments. The ILO conventions have to be submitted to parliaments, and once they are adopted, they are binding for the country. However, the parliaments and governments of member states can choose to totally disregard OECD advice. Since national welfare states are firmly rooted in their societies, institutionally secured and backed up by strong political coalitions, it is unlikely that criticism and arguments presented by a remote international organisation will cause major change.

The 14 country chapters, published in The OECD and European welfare states, show that the efficacy of OECD recommendations is low. In contrast, the consistency of the recommendations is very high. We argue that the high consistency is a function of the low efficacy. This does not imply that the OECD has no impact on welfare state development. Rather, we suggest that the way it can influence national social policy decisions is by creating epistemic communities which can guide long-term policy orientations.